Google buys online ad giant DoubleClick for US$3.1bn,

16 Apr 2007

UPDATE: Online ads juggernaut DoubleClick has been acquired by search engine colossus Google in an all-cash US$3.1bn deal that will give both companies control over 80pc of online advertising.

The deal, subject to regulatory approval, was announced after the markets closed on Friday and is expected to close by the end of the year.

DoubleClick is understood to have been the subject of a fierce bidding war between Microsoft and Google and the winning bid is three times the amount DoubleClick fetched when it went private in 2005 for US$1.1bn.

The acquisition is the largest in Google’s history, beating the whopping US$1.6bn the search player paid for social networking and entertainment site

New York-headquartered DoubleClick helps businesses to place and track online advertising, including the search ads business that Google has turned into a profitable business.

Google says the combination of Google and DoubleClick will offer superior tools for targeting, serving and analyzing online ads of all types, significantly benefiting customers and consumers:

For users, the combined company will deliver an improved experience on the web, by increasing the relevancy and the quality of the ads they see. For online publishers, the combination provides access to new advertisers, which creates a powerful opportunity to monetize their inventory more efficiently.

And Google says that for agencies and advertisers, the combined entity will provide an easy and efficient way to manage both search and display ads in one place. It says they will be able to optimise their ad spending across different online media using a common set of metrics.

“DoubleClick’s technology is widely adopted by leading advertisers, publishers and agencies, and the combination of the two companies will accelerate the adoption of Google’s innovative advances in display advertising,” said Eric Schmidt, Google’s.

Industry reaction amongst traditional telecoms firms and Google’s fiercest enemies namely AT&T, Microsoft and Yahoo has been predictably hostile to the news. They have been encouraging regulators to take a close look at the planned acquisition.

The critics warn the proposed acquisition raises serious competition and privacy concerns because it gives Google and DoubleClick unprecedented control in the delivery of online advertising and access to an enormous amount of consumer information.

If the deal goes through Google will account for nearly 80pc of ads served on the internet.

But from Google’s perspective the deal is being good for the internet. “It has been our vision to make internet advertising better – less intrusive, more effective, and more useful. Together with DoubleClick, Google will make the Internet more efficient for end users, advertisers, and publishers,” said Sergey Brin, Google’s co-founder and president of technology.

Telecoms and technology analyst firm Ovum believes Google’s strategy is sound.

David Bradshaw, principal analyst at Ovum, referred to the fact that prior to being taken private, DoubleClick reported revenues of US$76.3 million for the quarter to 31 March 2005 and US$301.6 million for the calendar year 2006.

“This suggests a price of at least 10 times its revenues. DoubleClick’s VC owners have already disposed of some operating units of DoubleClick so the multiple is probably higher,” said Bradshaw.

Bradshaw said that much of the analysis around the deal has focused on just how much Google is believed to have paid for DoubleClick, with many commentators saying that Google has overpaid.

“We disagree. Advertising is where the overwhelming majority of Google’s revenues come from and will continue to do so for the foreseeable future.

“Firstly, by keeping DoubleClick out of Microsoft’s hands, Google keeps Microsoft out of its back yard. Secondly, DoubleClick’s display advertising expertise complements Google’s existing business. If there is any company that can boost DoubleClick’s revenue, it is Google.

“Google is currently cash-rich so spending US$3bon to further both these aims seems well worth it,” said Bradshaw.

By John Kennedy